Example law essay

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Example Law Essay

The Enforcement of Covenants Affecting Freehold Land

This question concerns the enforcement of covenants affecting freehold land. In order to logically address the issues raised in this question, we will begin with a brief outline of the law relating to such covenants and then we will deal with each party/case individually.

In this context, a covenant is simply an agreement contained in a deed normally made between one party selling a portion of their land and the other party purchasing it. These covenants are used as a form of private planning control by the vendor to ensure that they can ‘shape' the uses to which the land they are selling is put to e.g. a covenant may dictate that no building above three floors can be erected on the servient land so as to preserve the view of the retained dominant lands. Most difficulties arise when such lands have been sold on to different owners and the owner of the dominant land seeks to enforce a covenant against the servient land. This is the case in the question posed.

When addressing issues relating to enforcing covenants, it is essential to first identify who the original covenantee was i.e. whose land was benefited by the covenants agreed to and who were the original covenantors i.e. whose lands were burdened by the agreements. In this case, Lola was the original covenantee and Anthony, Bob and Cait were the original covenantors. This tells us that Lola's land benefited from the requirements of the covenants and A, B and C's were burdened by them.

The core question now is that bearing in mind that all these original parties have sold their lands, can the current owner of the western plot of land, May, enforce the original covenants against D, E and F who are the current owners of the eastern plots. The law on this matter is complex but the underlying rationale is clear and it is critical to focus on this: because the current parties in this dispute are not the original parties to the agreement, the courts have always been very careful not to burden land with any unnecessary restrictions which may over time hamper its use and ultimately its saleability . The efficient use of land is essential to commerce and society and it should ideally be unhindered by private agreements made between parties who no longer own it. For this reason, the courts apply very strict tests when ordering the enforcement of such covenants.

In order to enforce a covenant, it must be demonstrated by May that she is entitled to the benefit of the covenants and that D, E and F are subject to the burden of them. Unless both of these can be established, then May will not be able to obtain relief from the courts . This is also known as the benefit and burden ‘running' with the land and as such it is normal to examine the passing of the benefit and burden separately to ascertain enforceability. Now let's examine each case.

Denise's Case

May is attempting to enforce the covenant against Denise which prohibits her operating a business from her plot. The first and most critical step is to decide if a covenant is either negative or positive . The simple test to apply to ascertain which type of covenant you are dealing with is to ask if it compels you to do something rather than not do something. The usual acid-test is from Haywood v Brunswick and asks whether it requires one to spend money to comply with the covenant. If it does, then it is a positive covenant. In this case, the covenant does not require the expenditure of money it just restricts the use to which the premises can be put and as such is a negative covenant . This is a fortunate for May as the courts severely limit the enforcement of positive covenants. Now we must examine if the burden and benefit has passed in relation to this covenant.

It has been long established at law that the burden of covenants cannot run with land , see Austerberrv V Corp. of Oldham and recently confirmed in Rhone v Stephens . The reason for this is, as outlined above, that the law does not like to see cumulative and excessive burdens imposed on land. If these were allowed, then over the centuries the uses of some land could become so restrictive as to make it worthless.

However, equity stepped in to ameliorate such a strict embargo and in Tulk v Moxhay it was established that in certain cases the burden will be allowed to run with the land once certain requirements are met. The requirements are that (i) the covenant must be negative rather than positive. This condition has been met. (ii) The covenant must confer a benefit to an identifiable dominant plot and not to a person. This requirement is broad but essentially requires that the original covenantee retained land which benefited from the covenant at the date of the covenant.

Furthermore, that the covenant ‘touches and concerns land'. The core of this requirement is that equity will only enforce covenants which benefit land and not a person and that covenants cannot exist without an identifiable dominant/servient relationship. In this case, Lola retained the dominant land and this was passed to May. Also, the covenant does grant a benefit to the dominant land as the absence of any commercial activities on the servient land reduces noise, traffic, etc . And even though we are not told that the two plots are adjacent (although it is implied because of the access road), this would not matter as immediate adjacency is not absolute necessity see Kelly v Barrett . (iii) The original parties must have intended that the burden runs with the land. Equity requires that the parties intended the burden to run with successors in title. We are not told this exactly just that it was for the “benefit of the retained land” which should suffice but by virtue of LPA 1925 S.79, the covenantor is also deemed to have intended the burden to run unless specifically excluded . (iv) Equity requires notice to enforce covenants. The essence of Tulk v Moxhay was that the purchaser had knowledge of the covenant involved and it was unconscionable for him to then breach it.

Today the concept of notice is much more formalised, namely a land registry and any covenants affecting the land of D, E, F would have to have been registered as a notice in the charges register relating to their land as per LRA 2002 . The covenant would then have been discovered by Denise's solicitor during her purchase and as such she would have notice of the covenant. If, for whatever reason, it was not registered then no notice exists and the covenants would be unenforceable. We will assume she had notice and so as such we can state that the burden will have passed to Denise.

Assuming we have proved that the burden runs in equity, we must also then prove that the benefit also runs with in equity. We cannot mix equity and law to achieve our result, both must run in equity. The simplest way that May can acquire the rights to the benefit of the covenants and thus enforcement rights is by “express annexation” i.e. the covenant stating that the covenant is for the benefit of the estate as per the ruling in Rogers V Hosegood . In this case, we are clearly told that the covenant was “for the benefit of the land retained” so we can assume the benefit has also passed in equity. Even if it was not expressly annexed in Federated Homes v Mill Lodge, the courts have held that once the covenant can be shown to be for the benefit of the covenantee lands, there will be an assumption of annexation.

With both the burden and the benefit passing in equity, then it is likely that May can enforce the covenant preventing Denise operating a business. In theory, the remedies available to May would be the equitable remedy of an injunction or damages in lieu of an injunction as per s.50 of the Supreme Court Act 1981. Considering that the guesthouse is already operating, the court would look at a number of factors. If as in Shelfer v City of London , it was held that injunctive relief was excessively detrimental to Denise, then the court might not be willing to issue a mandatory injunction ordering Denise to close her business. This would be so especially if May had knowledge that the guesthouse was going to be opening and did nothing until it was opened. Equity abhors delay. Furthermore, a small guesthouse with occasional guests might be considered a mild transgression of the covenant and the court may order damages to the level of what Denise might have had to pay May to agree to lift the covenanted restriction as per Jaggard v Sawyer . The courts will not simply issues injunctions upon request – equitable remedies are not automatic rights. To conclude, May can likely enforce the covenant but whether she can shut down the guesthouse or just get minor damages would be decided by the court based on the facts.

Elizabeth's Case

In order to comply with the covenant, Elizabeth would have to maintain the fence and fix it and this obviously requires here to do something. Hence, the covenant is positive. It should as such fail because the law will not allow the burden of any covenant to run with land and equity will not allow a positive covenant to be enforced. There is however a possible avenue which may assist May in ensuring the fence is maintained.

It has been accepted that based on the ruling in Austerberry v Corp. Of Oldham, that the original covenantor, Bob in this case, can be held liable for the burden of the covenant under law - even though he may have sold the land . May would however, have to prove at law that she is also entitled to the benefit of the covenant. This will require that she meet the requirements of P & A Swift Investments v CESG . These state that (i) the covenant must touch and concern the covenantee's land; (ii) the covenantee must have held the legal estate; (iii) there must have been the intention the benefit would run with the land. The first requirement necessitates that it must be for the benefit of the land and not a personal covenant. The maintenance of fencing obviously concerns the land and benefits it. The second requirement is also met as we are told they all purchased the freehold. The final requirement is the most important and can be satisfied in a number of ways. Firstly, s (78)1 of the Law of Property Act 1925 implies that the benefit runs with the land unless contradicted in the covenant. Furthermore, all agreements made after May 2000 would be affected by the Contracts (Rights of Third Parties) Act which also states that a person who is not a named party could potentially be able to enforce it. But neither of these routes are really necessary because it appears clear that the covenant expressly stated that it was for the benefit of the land. So we can assume that the benefit would run at common law and that the original covenantor can still be held liable for the burden.

The only problem with this contrived method of enforcement is practicality. Bob may or may not have obtained an indemnity covenant from Elizabeth to maintain the fences – he would have been advised to do so or possibly even required under the terms of Lola's covenant. If he did, then May's legal action might compel him to enforce his covenant against Elizabeth and this may result in the fences being repaired. But the difficulties of such an operation over a small amount of money is obvious. Furthermore, Bob may not have obtained an indemnity covenant from Elizabeth and/or he may be living in Australia, untraceable or dead. To conclude, it is impossible for May to compel Elizabeth to maintain the fence directly. Therefore, her only possible remedy is to pursue Bob and hope that he obtained an indemnity covenant. However, the financial practicality of such an option is questionable over minor damage to the fence.

Fay's Case

On the ‘covenant' to take in ironing, we can quickly dispense with this issue. In theory this may be described as a covenant. However, the taking in of ironing was a personal service between the original parties and as stated above any covenant must ‘touch and concern' land in order to have any chance of enforceability. To be required to take in ironing is a personal not a proprietary right and clearly fails . No court would enforce it on Fay.

The maintenance of the common road is however a more substantial matter. It is clearly a positive covenant based on the arguments above and the general rule is that neither equity nor law will normally enforce positive covenants . However, there is one exception to this rule which was established in Halsall v Brizell . In Halsall, it was established you can be obliged to assume the burden or a positive covenant if you choose to enjoy the benefit. In Rhone v Stephens and in Thamesmead Town Ltd v Allotey , it was emphasised that this exception will be tightly controlled and the benefit and burden must be closely linked. In Thamesmead, the current owner was only obliged to pay service and road charges for a road he could and did use. In Fay's case the facts are similar. The original party was originally granted the express right to the use the road over Elizabeth's land for the benefit of their land i.e. an easement. Furthermore, we can assume that Fay must be using the road to access her property. Based on this, the courts would likely hold such a covenant enforceable as she clearly is assuming the benefit to access her property and so she should carry the burden of the covenant . The only escape might be a claim that she does not use the road, or possibly uses it very little relative to the others. The covenant states a “fair” amount and this may suggest a pro rata amount in relation to usage. If she did not use the road – because she possibly acquired another route to the man road - then she has no benefit and need assume no burden. If the courts found in Elizabeth's favour then the remedy would most likely be damages in lieu of an injunction for the “fair” amount of maintenance money.

Answers to specific Questions :

1. Whether the benefit of freehold covenants runs with the land at common law; Yes, it can run under specific circumstances detailed above.

2. Whether the burden of freehold covenants runs with the land at common law; No, common law has rejected the running of the burden at common law.

3. Whether there is a way of circumventing the common law rules and whether this is relevant on the facts of the question; Yes, using the Tulk v Moxhay rationale you can circumvent the common law rules. This is relevant in one of instances outlined above. Halsall can also be used to circumvent the common law rules.

4. Whether the burden of freehold covenants run in equity; The burden can run in equity in certain circumstances and these are outlined above.

5. Whether it is necessary to consider if the benefit of the covenants runs in equity If the burden runs in equity then the benefit must also run for there to be enforceability of covenants. This is detailed above.

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